I am hoping these posts are helpful. Today, I want to tackle property management fees!  While property management fees are important they must be viewed in light of what other firms are charging, the scope of services provided & the quality of those services.

A PM company is stewarding one of your biggest assets & the last thing you want to do is make your decision based solely (or even primarily) on who charges the lowest fees.  

A low price often indicates a lower service quality or a firm struggling to remain profitable -potentially leading to overworked managers. Price should be considered after confirming the firm offers quality services. Low fees won’t matter if the company doesn’t perform well or provide value to you.

Also, ensure you compare all potential fees, as hidden charges can negate any savings from lower management fees. Common fees to clarify with prospective firms include:

• Management Fee: Typically 8-12% of monthly rent, varying based on property size, location, & included services.
• Vacancy Fee: Some companies charge a vacancy fee even when there’s no rent coming in. Ensure contracts specify fees are based on “collected rent.”
• Set-up Fee: Fees for setting up an account range from $0-$500. Confirm if it's per unit or per property.
• Leasing Fee: This compensates for finding tenants & can be up to 100% of the first month's rent. Some prefer it bundled into the management fee to incentivize long-term tenants.

A good management company should view the management fee, NOT the leasing fee as the primary profit center. This is why leasing fees as a stand alone service (meaning without other property management services) are typically much higher (75-100% of first months rent).

A transparent fee structure discourages high turnover, benefiting both parties.

Good "pricing" questions to ask when vetting PM companies:

1. - How much is the leasing fee? This ranges from 25% to 100% of the first months rent, but 50% is pretty standard. Instead of charging a percentage, some firms charge a flat fee or a percentage of the gross amount for which the lease is written.
2. - Does their leasing fee decrease or get waived if it takes them an unreasonably long time to find a tenant?
3. - Is the leasing fee structured in a way that provides the firm incentive to bring in reliable tenants? This usually either means a full or partial refund (sometimes pro-rated) in the event that the tenant is evicted, or breaks their lease within 12 months of the original move in date. Some firms have a policy of only charging this fee once per 12 months per unit which has the same affect.
4. - Do they use leasing agents? If so, what will you have to pay them in the event they find you a tenant?
5. - Do they require exclusivity in advertising, or can you advertise the unit as well? If you find the tenant do you still pay the fee?
6. - Are there any restrictions or extra charges for showings (they only do X number a week, or not on weekends etc.)?

This should give you a good start! Best to you.